Bankruptcy Mistakes

• Don’t use your credit cards, take cash advances, use convenience checks or do balance transfers on your credit cards within 90 days of filing.
• Don’t use your credit cards in a substantial way within 90 days of filing.
• Don’t pay back money to family or friends.
• Don’t transfer money prior to filing for bankruptcy.
• Don’t leave assets off your bankruptcy petition.
• Don’t file when you are owed a substantial tax refund.
• Don’t file bankruptcy if you are about to receive an inheritance or large insurance settlement.
• Don’t try to hide income from your small business.
• Don’t sell, transfer or give property to anyone without talking to your bankruptcy attorney. Don’t cash out retirement plans or 401k.
• Don’t take out a second mortgage.
• Don’t hide assets or debts.
• Don’t take out “payday loans.”
• Don’t “save” a credit card with a balance for after your bankruptcy.
• Don’t fail to list debt to family or other “insiders.”
• Don’t write bad checks.
• Don’t forget to tell your bankruptcy attorney about liens you may have on your home so they can be avoided.
• Don’t make major financial decisions without consulting a bankruptcy attorney.
• Don’t misrepresent any facts to your bankruptcy attorney or the Bankruptcy Court.
• Don’t have more than about $800 in your bank account (or other liquid assets, such as cash, stocks or mutual funds) on the day of filing for bankruptcy. Time the filing so that you file on a day when your bank account is at an absolute minimum. This is important because the Court will ask that you provide a bank statement for all your accounts and they will rely on the account balance as listed in the statement, not the balance in your check register. Taking the money out and paying your bills with money orders will ensure that the balance is low.
• Don’t pay a relative or friend significant amounts of money (more than about $400) or otherwise transfer any assets out of your name within the year prior to filing bankruptcy. Don’t pay any unsecured creditor more than $600 in the 90 days before filing bankruptcy. Don’t incur more debt once you have seriously considered bankruptcy as an option. Don’t charge on any card for 90 days before filing bankruptcy. Don’t file if you are intending to sell your real estate soon.

Bankruptcy is a great opportunity to get your financial life back on track. Courts want to help meritorious debtors, but there is little patience for people who are not honest. As my grandfather would have said, “Pigs get fat, but hogs get slaughtered.”

If you believe you have made one or more of the bankruptcy mistakes listed above, or have any issues related to them, be sure to discuss them with your bankruptcy attorney. Some of them may be corrected.